Compal acquires wireless unit

Compal Electronics Inc (仁寶電腦), the world's second-largest notebook computer maker, said yesterday that it will buy a unit of wireless equipment maker Accton Technology Corp (智邦科技) for NT$984 million (US$30 million).

Compal will buy 26.6 million shares at NT$37 per share for a 69 percent stake in Arcadyan Technology Corp (智易科技), a 100 percent owned subsidiary of Accton Technology, Compal said in a statement.

The deal was approved by the two companies' boards of directors yesterday.

"Compal will be able to create a complete wireless communications business by integrating resources with Arcadyan," the statement said.

The new business will move into the areas of digital multimedia home applications and dual-mode phones by utilizing Arcadyan's Internet protocol technology, Compal said.

It is now commonplace for laptops to have built-in wireless communications features, resulting in increased collaboration between notebook computer vendors and wireless technology companies, according to the statement.

The partnership would ensure ample wireless module supplies for laptop computer makers, while at the same time helping the firm to enlarge its client base and introduce new products, Compal said.

Compal will reduce its holding in Arcadyan to 60 percent after distributing shares to employees, with the remaining shares to be held by Accton. Arcadyan will probably hold an initial public offering within two years, the companies said.

Ray Chen (陳瑞聰), president and chief executive officer of Compal, had said repeatedly in recent investor conferences that the firm was looking for merger and acquisition opportunities to diversify its product portfolio and increase margins.

Although the company projected a rosy outlook for its notebook shipments in the second half of the year, its gross margin in the second quarter dipped below 5 percent for the first time to 4.7 percent, compared with 6.2 percent a year ago.

Chen said on April 26 that Compal would leverage mergers and acquisitions to move into new areas such as wireless communications, digital home entertainment, automotive electronics and portable media devices.

"Our product diversification is still in its infancy ... without major mergers, this segment will probably contribute a single-digit percentage to our revenues this year," he said at the time.

Currently, notebook computers account for 90 percent of Compal's sales, with the remainder contributed by non-core business such as liquid-crystal-display televisions and monitors, wireless products and portable media players.

The firm said earlier this month it expected its non-notebook segments to account for 20 percent of total sales by 2008.

Compal reported profit of NT$8.42 billion on sales of NT$266 billion last year, while Accton Technology posted a loss of NT$302 million last year on sales of NT$18.3 billion.

Shares of Compal closed down 0.2 percent to close at NT$27.95 yesterday on the Taiwan Stock Exchange, while shares of Accton were up 1.7 percent to NT$18.2.